Equipment Merger Update

Deere Pushes Back on Lawsuit, Announces Licensing Deal With Ag Leader

Precision Planting's SpeedTube high-speed planting system, pictured above mounted on a Deere planting unit, is at the center of a Department of Justice lawsuit to stop John Deere from purchasing Precision Planting. Deere has offered to license the technology out should the deal go through. (Photo courtesy of Precision Planting)

ROCKVILLE, Md. (DTN) -- Let the negotiations begin.

On Wednesday, John Deere announced its intent to license Precision Planting's high-speed planting technology, SpeedTube, to Ag Leader Technology once Deere's proposed purchase of Precision Planting is completed.

The move appears to be an initial attempt to appease the U.S. Department of Justice, which filed a lawsuit in August to stop Deere's acquisition of Precision Planting. The lawsuit argues that the purchase would allow Deere to hold a monopoly on "high-speed planting technology." At issue are Precision Plantings' SpeedTube technology and John Deere's ExactEmerge technology, which are designed to move seed out of the planter and into the furrow faster, without losing accuracy. The systems allow farmers to essentially double their planting speeds, from 5 to 10 miles per hour.

The DOJ lawsuit claims that Deere's ExactEmerge technology accounts for 44% of the high-speed planting market, and Precision Planting's SpeedTube technology accounts for 42%, for a combined monopolistic market share of 86%.

Deere pushed back against this characterization of the purchase in a formal court filing on Thursday, shortly after the announcement of the Ag Leader deal. The company insists that high-speed planting technology is not a market in and of itself and argued that the purchase won't endanger competition, in part thanks to the new licensing agreement.

THE LICENSING AGREEMENT

Some experts are skeptical that the Ag Leader licensing agreement will satisfy the DOJ, particularly since it is not an actual divestment of the SpeedTube technology. "I would be surprised if this is going to be enough," Iowa State University agricultural economist GianCarlo Moschini told DTN. "A lot could depend on the terms of the licensing agreement that they've suggested."

In its press release, Deere said the licensing agreement would allow Ag Leader to manufacture and sell SpeedTube and its related technology, such as vSet, VDrive and DeltaForce.

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"Deere anticipates Ag Leader will sell Precision Planting components to retrofit Deere and other brands of planters and will provide a separate and competitive source of supply for OEM planter manufacturers that choose to equip their products with Precision Planting components," Deere wrote in its press release.

It doesn't appear that any actual assets or patents are being transferred to Ag Leader, Moschini noted. "I suspect some of the concerns about innovation that the U.S. Department of Justice has will remain," he said.

PUSHING BACK AGAINST THE LAWSUIT

The Department of Justice's lawsuit claims that Deere's acquisition is a direct attempt to stifle the competition it has faced ever since Precision Planting first began selling SpeedTube in 2014. The technology was sold as a set of components that could be retrofitted onto existing planters made by all major planter manufacturers, including Deere.

This move inspired "vigorous" competition between the two companies, forcing Deere to reconsider pricing and ultimately offer its own ExactEmerge planting system as a retrofit option in August of 2015, the lawsuit states. (Previously, Deere's ExactEmerge planting system was only sold as part of new planters.)

When considering a purchase of Precision Planting from Monsanto, the DOJ lawsuit claims Deere estimated it could avoid cutting ExactEmerge prices by 5% to 15%, as well as "temper" the growth of the retrofit business "by reserving the best and most advanced high-speed planting technology for new Deere planters."

Deere has pushed back against these arguments in a court filing, starting with the monopoly concerns. The company contends that high-speed planting technology is just one of many factors farmers consider for planting equipment and should not be considered a market in and of itself.

The company also suggested that the lawsuit was inspired by a competitor's complaint and not the DOJ's own research and concerns.

In the filing, Deere dismissed concerns that it would pivot away from the lower-cost retrofit options, and said its ExactEmerge planter technology will continue to be available for new and recent Deere-model planters and SpeedTube products will remain available for older Deere planters.

As for other manufacturers' planters, Deere concluded that its licensing agreement with Ag Leader Technology will supply "an additional independent and competitive channel for growers and OEM's to purchase Precision Planting's SpeedTube and other components."

For more information on the DOJ lawsuit, you can read the filing here: http://bit.ly/…

You can find Deere's filing in response to the lawsuit here: http://bit.ly/…

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Emily Unglesbee

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